Potential deal- Need help from pros!

[larolargo]

I`m working on a deal now and would really appreciate if I could get some input from the pros!
The seller is willing to sell with an AFS, but i`m worried about the monthly payment.
The deal is in Port Moody, BC. and it`s a condo 2/1, 881 sqf.

Arv:$199,000( according mylandcor.com)
Asking: $177,000

Loan:$177,000
PITI:$1,030 + $287(strata)=$1,317
Term due oct, 2011.
Current!
Good condition but new carpet isn`t a bed idea.

Out of town owners.
Rents for $1,000-$1,150.

I intend to visit it ASAP to check what the neighbourhood is like!
Plus I am not sure if i`ll have a problem selling since this price range is very low for Vancouver and Ron wants us to buy median +/- price range.

I intend to exit with a rent to own. But I`m worried about the high monthly payment.
On the other hand there`s some equity.

I`d really appreciate your help!

Thank you!

Mario

 

[Thomas Beyer]

QUOTE (larolargo @ Dec 16 2010, 06:07 PM) ... Asking: $177,000

Loan:$177,000
PITI:$1,030 + $287(strata)=$1,317
...
Rents for $1,000-$1,150....

I intend to exit with a rent to own.
how to make money here ?

Why is this a good investment ?

rent-to-own is a senior strategy .. and it is also not done usually with condos !

 

[lanedry77]

QUOTE (larolargo @ Dec 16 2010, 05:07 PM) I`d really appreciate your help!Mario,

It sounds like you have a decent grasp on the situation. Do you have any specific questions?

In general, I`d ask you if you felt the fair market rent plus an option payment could cover your costs and still provide you with some cash flow?


Thanks,

David.

 

[larolargo]

QUOTE (DavidSandbrand @ Dec 16 2010, 06:22 PM) Mario,
It sounds like you have a decent grasp on the situation. Do you have any specific questions?

In general, I`d ask you if you felt the fair market rent plus an option payment could cover your costs and still provide you with some cash flow?


Thanks,

David.

Hey David,

probably I can have a couple of dollars positive cash flow if I charge $1,150(rent) + $200(option deposit).

I expect to get at least $6,000(3%) option deposit and the remaining from back end profit. I`m being conservative on my numbers.

I`ll talk with the seller about the possibility of extending the term in case i need because it expires october 2011. and I can`t cash out right away because of
the penalty.

I will also ask the seller to make the next 3 payments.

My concern is RTO working with condos as Thomas pointed specially I really low priced one. The upside is the equity.

I`ll talk with the seller today in order to set up an appointment and if it looks good and the area is ok i`ll get under contract and start to play the market.

It`s pretty close to Simon Fraser University.

Thank you David and Thomas!

Hopefully I can get my first cheque!

 

[Thomas Beyer]

QUOTE (larolargo @ Dec 16 2010, 09:38 PM) ... start to play the market... Hopefully I can get my first cheque!
playing and hoping are usually NOT attributes of a successful strategy !

get educated ! Follow a system ! KNOW THE LEGAL PAPERWORK !

Also, have some money to start and for down payments, repairs, vacancies .. say $10,000 to $20,000 ! Then WORK A SYSTEM HARD !

Then it WILL work !!

For example: run an ad online or in newspaper for potential rent-to-own tenant/buyers.

In parallel, with different e-mail address and a 2nd phone number, advertise

"Looking to get out of your condo and have me take over your payment ? Call me at XXX or email at YYY"

or

"Condo and mortgage payments stress you out ? Call me !"

Then you will get names of potential tenant-buyers and motivated sellers. Once you have enough of them (say 10-12) and they are pre-qualified .. match them up ! That is likely 50-60 physical meetings and more telephone discussions in a few weeks. This is a LOT OF WORK .. and takes some tweaking .. but a successful strategy that can replace playing and hoping !!

It is critical that YOU THOROUGHLY UNDERSTAND
a) the legal paperwork, namely a lease and an option-to-buy for tenant/buyer, AND
b) the appropriate legal paperwork to sign with seller, AND
c) how to qualify potential tenant-buyers (as much havoc is usually created once tenant bails or doesn`t pay or trashes the place)

 

[lanedry77]

Hi Mario,

I fully agree with Thomas - you need to know what you`re doing, not just guess and hope.

Also, the ideas of marketing to both groups with different numbers is excellent.

But I`ll take a more optimistic view;

Since the condo is priced low, it will be more achievable for your RTO buyer to get qualified (with your help, and the help of your mortgage broker!).

also, given it`s close to SFU, you should not have a problem in finding someone interested in it.

There`s nothing wrong with condos/townhouses. My first property was a townhouse. I know Thomas`s first investment was a condo from his excellent `rose with thorns` presentation months ago. Don and Russell have townhouses, etc...

Perhaps the seller will cooperate with you and re-finance it before you take it over. That would get the payments down. Get a contract first though - to protect yourself so they don`t want away after the re-fi.

If I were in your shoes, I would (1) go get a purchase contract on the property WITH CONDITIONS, so you can get out of it. then (2) market it and see who applies to RTO it from you. (3) work with your mortgage broker to make sure they will be able to get qualified for the purchase in the future, an d(4) either remove conditions and move forward, or don`t remove conditions.

... either way, you have no risk.



thanks,

David.

 

[Thomas Beyer]

QUOTE (DavidSandbrand @ Dec 17 2010, 12:57 PM) ...
There`s nothing wrong with condos/townhouses. My first property was a townhouse. .. Don and Russell have townhouses, etc...
townhouses work better than condos as they are more of a "house" than a shared common building with usually high condo fees you cannot control well !

QUOTE (DavidSandbrand @ Dec 17 2010, 12:57 PM) ... I know Thomas`s first investment was a condo from his excellent `rose with thorns` presentation months ago.
.. but not a rent-to-own .. and later I "upgraded" from retail condos to wholesale buildings due to a better way to control cost and less price/unit !

QUOTE (DavidSandbrand @ Dec 17 2010, 12:57 PM) ... either way, you have no risk.
There is always risk. Always. You just need a way to anticipate it and mitigate/reduce it !

 

[lanedry77]

QUOTE (ThomasBeyer @ Dec 17 2010, 12:34 PM) There is always risk. Always. You just need a way to anticipate it and mitigate/reduce it !
Absolutely Thomas, but what I was trying to impress on Mario is that he needs to go take action and write a conditional offer that he can get out of.

It`s too easy in this business to stay behind a keyboard all day analyzing, and never take action. I was only trying to encourage him to take action that would be easy to undo (the condition being an excellent risk mitigation).


Thanks,

David

 

[Thomas Beyer]

QUOTE (DavidSandbrand @ Dec 17 2010, 04:08 PM) Absolutely Thomas, but what I was trying to impress on Mario is that he needs to go take action and write a conditional offer that he can get out of.

It`s too easy in this business to stay behind a keyboard all day analyzing, and never take action. I was only trying to encourage him to take action that would be easy to undo (the condition being an excellent risk mitigation).
sure .. but the best risk mitigation tool out there is called EDUCATION, AWARENESS, COMMON SENSE, PRUDENT ADVICE and EXPERIENCE .. as at some point you have to waive conditions to "take action" !!

 

[larolargo]

QUOTE (DavidSandbrand @ Dec 17 2010, 02:08 PM) Absolutely Thomas, but what I was trying to impress on Mario is that he needs to go take action and write a conditional offer that he can get out of.

It`s too easy in this business to stay behind a keyboard all day analyzing, and never take action. I was only trying to encourage him to take action that would be easy to undo (the condition being an excellent risk mitigation).


Thanks,

David

Hi David,

do you mean conditions such as:

"Subject to home inspection satisfactory to the buyer"
"subject to buyer`s lawyer approval of paperwork"

So here is what i will do:

If the seller tells me he wants to go ahead and do the deal i will put an add on kijiji/craigslist to feel the market(build buyers list) and visit the place(the seller lives in Victoria BC) as soon as possible.
If I have a satisfactory response and the inspection is satisfactory i will waive the condition; however i will ask the seller to make the next 2-3 payments.

 

[lanedry77]

Hi Mario,

Exactly. The condition I like is simply "Subject to the approval of the buyers lawyer" - this gives you the ultimate flexibility in choosing to proceed. With this one condition, you can still get an inspection, but it gives you additional flexibility to an inspection condition.

Also Mario, there`s nothing stopping you from posting an ad on Kijiji/craigslist/various rental sites right now with an ad that will let you judge the market and also build your buyers list. Of course, you don`t have a property yet, but you could post a `coming soon` ad and see what the interest is like. there`s no risk, and there`s LOTS to gain by this.


Thanks,

David.

 

[lanedry77]

QUOTE (ThomasBeyer @ Dec 17 2010, 03:47 PM) sure .. but the best risk mitigation tool out there is called EDUCATION, AWARENESS, COMMON SENSE, PRUDENT ADVICE and EXPERIENCE .. as at some point you have to waive conditions to "take action" !!
Hi Thomas,

I couldn`t agree more.

... but the catch-22 here is that without action, experience is never obtained and if you wait to have experience, you`ll never take action.

In this case, I believe that writing a conditional offer is the appropriate action, and is the next step in building experience while still anticipating the risk that is always present, and taking the appropriate step to mitigate and reduce it - exactly to your earlier point.

I believe we are saying the very same thing Thomas, just from a slightly different vantage point and with a slightly different approach to it.



Thanks,

David.

 

[larolargo]

QUOTE (DavidSandbrand @ Dec 17 2010, 06:41 PM) Hi Mario,

Exactly. The condition I like is simply "Subject to the approval of the buyers lawyer" - this gives you the ultimate flexibility in choosing to proceed. With this one condition, you can still get an inspection, but it gives you additional flexibility to an inspection condition.

Also Mario, there`s nothing stopping you from posting an ad on Kijiji/craigslist/various rental sites right now with an ad that will let you judge the market and also build your buyers list. Of course, you don`t have a property yet, but you could post a `coming soon` ad and see what the interest is like. there`s no risk, and there`s LOTS to gain by this.


Thanks,

David.

Hi David,

Thank you so much for all the great information!

Do you have an add in particular that you use to build your buyers list without having a home for sale.

Should I just post something like:

Rent to own a home in Surrey, bad credit okay!
Act now, will go fast
606-555-5555

Since I don`t have anything under contract yet I will run a more general add.

Thanks!

Mario